Hutchison says sorry to customers amid losses

Hutchison has apologised to customers for problems on the Vodafone Hutchison Australia (VHA) mobile network as VHA reported a customer loss of 178,000 in the first half of this year. Hutchison chief executive, Bill Morrow, pledged to upgrade the carrier’s network and improve customer service, while also asking for help from the government competing with Telstra.

“The primary root cause behind the damaged image of our brand and current operating performance is the inconsistent and sometimes uncompetitive customer experience across the various touch points,” said Morrow, who joined the company in the first half of the year as part of an organisational restructure.

“While it has not always been the case, we have lost the trust and respect of many customers. I will say here and now we owe our customers an apology for the past and a commitment for the future that we will rebuild our operations to prevent this from ever happening again."

VHA finished the first half of the year with 6.8 million customers. The 178,000 customer loss was about flat with the trend in the second half of 2011, but less severe than the first half of 2011, Morrow said. The company reported a $131.3 million loss for the half. Hutchison share of Vodafone Hutchison Australia’s total revenue sank 9 per cent year-over-year to about $1.04 billion, and the company’s share of VHA’s service revenue dropped 15.8 per cent to $874.9 million.

The company also saw a decrease in average revenue per user. Morrow attributed that to customer churn. The company’s highest value customers are leaving more quickly than others. Most of the customers that the carrier has recently acquired are “value” customers who don’t spend as much money, he said.

Morrow said to expect Hutchison to see continued revenue and customer losses for the next 12 months, but predicted improved numbers thereafter.

“The financial performance of VHA was impacted by its ongoing operating challenges and the intensely competitive mobile market in which it operates,” said Hutchison CFO, Dave Boorman.

Morrow stressed that the carrier was upgrading its network to address problems. Hutchison’s spending was up 22.4 per cent year-over-year, reflecting investment in network upgrades, he said. The carrier is upgrading the network to 3G HSPA+ this year with the goal of moving to LTE next year. Morrow said the company is also working to improve customer care. TIO complaints are down by one-third since the first half of last year, he said.

Morrow said he hopes the government will be “somewhat sympathetic and help us from a regulatory view of making sure that they keep competition here in Australia.” Telstra has “had an advantage” and “some regulatory favour,” he said.

Hutchison is still deciding whether to participate in the Digital Dividend auction set for April next year, Morrow said. The company plans to reach a decision in the next few months, he said. Morrow emphasised the company would be in good shape even if it did not bid for the 700 MHz and 2.5 GHz spectrum to be made available after broadcasters shut off analog broadcasts.

With three carriers bidding over 45Mhz of spectrum, bidding in the auction is likely to be expensive, Morrow said. Also, VHA’s current spectrum position “is actually quite rich” and “better” than the other two carriers, he said. VHA could deploy LTE over existing 1800MHz channel and potentially have higher speeds than other carriers because it has 20 MHz of spectrum in that band, he said.

Using 1800MHz spectrum could also be an advantage because that band is already used around the world for LTE, Morrow said. The 700MHz spectrum to be provided under the Digital Dividend will require special microchips in phones, he said.

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